How to Get a Great Home Loan - A Guide
If you’re in the market for a new home you may be wondering how the entire process works. How does one start to finance a new home? What is a home loan? Where can I get a good home loan? A great way to start is to have a basic grasp of the mortgage terms you’ll need to know. That way when you start researching the type of loans available you’ll have an easier time. That is especially true if you’re buying your first home or haven’t purchased a home for quite a while. Read on to get the complete guide of how to get the home loan you need and the house you love.
How to Apply for a Home Loan
Back in the day (before 2006) - home loans were a lot easier to get. The amount of documentation asked for and the paperwork you needed to sign was very minimal. When the recession hit in 2006 and the crash of the housing market - the mortgage industry was changed forever.
Now, borrowers are given a list of documents they’ll need to gather up to get started. And, if your loan officer knows their stuff the list will be thorough so you’re not missing items along the way. Although these changes mean more work for both the mortgage lender and borrower, it ultimately protects all parties much more, so overall the changes have been for the best. Here are some of the basic documents you will want to have on hand when you consider a home loan:
- Employment records
- Profit and loss statements (if self-employed)
- Bank statements
- Income records
- Tax returns
- And possibly: divorce decrees, bankruptcy papers, and a homes' sales contract
As a borrower, when you first meet with your mortgage professional they will take an application and ask you lots of questions about your income, assets, and debts. If the information you provide looks promising, they’ll go ahead and pull your credit report.
The type of loan you can get and the amount of your loan depends on the above, so it’s important to have up to date information and to provide your professional with the documents they might need. That will help the whole process go by a lot smoother.
Before you go to a secure a loan though, it’s generally a good idea to figure out how much you can afford for a house payment. For this, you should consider using a loan calculator.
Use a Home Loan Calculator
If you’ve been shopping for a home you’re probably obsessed with loan calculators. It’s fun to calculate how much house you can afford. Good calculators take into account the current interest rate. But don’t be fooled by super low rates. Sometimes to get those you have to pay extra. Just use the calculator as a guide once you talk to a mortgage broker.
To be as accurate as possible when calculating, you need to have a good idea of what taxes and insurance costs are in your area. Those amounts can make a big difference. And if you’re looking at a planned community or condominium complex, don’t forget any HOA fees.
A huge advantage of using a calculator is you can see what the difference of a larger or smaller down payment makes. Surprising, sometimes putting more money down doesn’t lower your monthly payment as much as you thought it would.
Comparing Different Loan Services
There are different types of home loan services depending upon if you go to a mortgage broker or a bank. With a broker, you may have a larger selection of loans available to you. But in some cases, like new home construction, the builder has special incentive financing that a broker couldn’t touch. Whether you go to a broker, bank, or builder’s in-house lender may depend on what type of home you’re wanting to buy.
Regardless of where you get your loan, it is a smart idea to compare basic fees for underwriting, application, and processing. And of course, you’ll need to look at the rate. That being said, the interest rate you’ll be charged will depend on your credit and how much money you’re putting down. So, if you’re comparing lender programs, make sure you’re comparing apples to apples.
As with any service, your confidence in the provider is key. Meet with your loan professional face to face if possible so you can get an idea if they would be the right choice for you and your circumstances. After reading this article you should be more prepared for any paperwork you may be asked for as well as application questions.
One last point that’s important to make is the home loan process can be cumbersome so it’s important to be flexible and give your loan officer the documents as soon as they ask you for them. That alone will keep your home loan process moving along much smoother.
If you’d like to learn more about the mortgage experience and how to get a home loan visit: Pulte’s Mortgage learning center.
Contributed to Your Home blog by Carol Youmans
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